Monday, 6 December 2010

Economic development professionals in favour of relocalisation

It doesn’t really come as much of a surprise to hear that a piece of research by the Centre for Cities has concluded that 76% of senior economic development professionals, based in cities and towns throughout England, believe that relocalising business rates would be a positive step for their respective areas.

I think it is pretty clear that such a move would be almost certain to benefit cities. After all, the vast majority of business rates tax revenue is derived from urban locations. So, if local economic development professionals were to be handed control of these pots of money, they would clearly be failing in their duty to their local economies if they were unable to create some form of positive enhancement.

Aside from the fairly obvious conclusions of this research, there are three additional points to be considered, which will hopefully bring some balance back to the debate:

1) I have no doubt economic development professionals the length and breadth of the country are keen to seize local control of funding mechanisms, but what do business owners, employers and occupiers think of the idea of losing the predictability of a centrally-managed system in order to reap the benefits of local investment decision-making?
2) Rural communities benefit greatly from the existing process of tax income redistribution. Wouldn’t it be more beneficial to our overall understanding of the issues at stake for research such as this, albeit being carried out by the Centre for Cities, to consider the views of a broader range of interests? It is important for rural England’s voice to be heard too, and I encourage their representatives to join the debate.
3) More ominous is the comment which underpins the key rationale for the relocalisation of business rates – “With local finances under intense pressure, many[of the respondents] see these new [rates localisation]tools as a way to fill the gap left by public spending cuts.”

Fill the gap?? Dare I ask, at whose expense?


Anonymous said...

The sentiment is well founded but this is likely to prove a life belt for cash strapped Councils needing extra revenue. Probably a recipe for inequality and a backward step.

RIB said...

It depends how far the concept of Big Society should extend itself. Centralism may have gone too far in the way in which it affects everyday life, and so the involvement of local government administrators in making decisions at a local level may bring community benefits.

However, are we ready for an environment in which local government actively creates an unlevel business tax playing field via the business rates mechanism?

The Centre for Cities research makes clear the benefits for those who would control the purse strings locally, but I would really like to know if businesses are actually in favour.

Do you think locally variable business rates will be treated by businesses as just another competitive factor to take into account when making strategic business decisions such as premises choice and location?

And what safeguards should be put in place to limit the locational inequalities which appear almost certain to arise?